MoA, Turkish co sign 23.7m Br lease for cotton

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Addis Fortune | 9 October 2011
Based on the research conducted by Ethiopian Development Research Institute (EDRI) the standard lease price of one hectare of irrigable and rain feed land, which is located 500 Km from the capital is fixed at 992 Br and 921 Br, respectively. EDRI developed a standard lease price based on the type of land and its proximity to Addis Abeba. Irrigable land located 700 Km from Addis Abebea fetches 151 Br per hectare while rain feed land located at the same distance fiches 111 Br per hectare.

Ministry approves only half of 12,000ht request by Toren Agri Plc

By MAHLET MESFIN

The Ministry of Agriculture (MoA) has signed a 23.7 million Br land lease contract with Toren Agri Plc, a Turkish company, for large scale production of cotton at its head quarters at Asmera road on Monday, October 3, 2011.

The 25 year agreement with a lease price of 158 Br for a hectare was signed by Tefera Derbew, minister for the MoA and Mohammed Kedir, a representative of Toren. Although, Toren, the first Turkish company to engage in cotton production in Ethiopia, had requested 12,000ht plot and prepared its business plan with that in mind. However, the ministry allowed only with the rest to be approved base on the company’s performance.

The company is expected to make a 960,000 Br to acquire the irrigable land located in Gambella regional state, Wondo-Goge wereda, 900km from Addis Abeba. It is located adjacent to Gillo River where the company plans to divert water for over head irrigation system.

“The company will be productive as the area is not saturated like Afar Regional State where many cotton growers use Awash Valley,” an agricultural expert at the Ministry, who is not authorised to comment, told fortune.

Large scale cotton production is carried out under irrigation mainly in Awash Valley, where more than 50,000ht is under cultivation. Omo-Gibe, Wabi Shebelle, Baro Akobo, Blue Nile river basins are also potential cotton producing areas.

The company would finish 30pc of the project within a one year period, according to its business plan.

“If the company fails to finish at least 30pc, which involves making the land ready for plantation, the ministry will be obliged to take the land,” the expert told Fortune.       

It is the second land lease contract for production of cotton the ministry has signed in this fiscal year. The first one was signed with MAMAY Plc for a 3,000ht of land in Dangur district, Benishangul Regional State, 1,032km from the capital, two weeks ago.

The MoA has identified a total of 2.6 million hectares of land fit for cultivation of cotton, which is equivalent to what Pakistan, the fourth largest cotton producer in the world, uses for the same purpose.

To date, only 93,985ht of land is covered with cotton, of which 26,377ht are held by private investors and the rest by local farmers.

The ministry gives priority for industrial crops such as cotton, sugar cane, rubber than the export commodity crops and seasonal crops in providing land. Out of these cotton came at front of the agriculture centre last year when a local supply was not enough to meet demand from local textile and garment manufacturers. The demand for cotton in Ethiopia has increased from 57,000tn to 76,000tn in 2011, a 33pc increment from the previous year.

In a bid to satisfy the demand, the ministry has leased 54,000ht, slightly bigger than the size of Addis Abeba mostly in Benishangul Regional State to eight private investors in the last fiscal year.  

The ministry charges a standard lease price based on the type of plot (irrigable and rain fed) and its proximity to the capital based on a research done by the Ethiopian Development Research Institute (EDRI), which was established in 1999.

Out of the available land, plots located 500km from the capital and are easily irrigable were set at 992 Br per hectare, according to the pricing of the finding.

The ministry leases a minimum of 3,000ht of land and a maximum of 25,0000ht for cotton growers. An investor is required to show a bank statement of one year which shows a balance of 30pc of the reinvestment and the audit report of the company and an environmental impact assessment study report along with the business plan. Foreign investors and people from the Diaspora are required to get a support letter from the Ethiopian Embassy where they live.
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